Ricky
Wong - Moonshine Photo for Asiaweek Zeng's Sparkice Internet cafés have helped turn hip urbanites on to the
Internet. Next he wants to reach into the hinterland to wire peasants and
farmers

The
Sparkice Man ComethEdward
Zeng is transforming his pioneering chain of Internet cafés into a business
network he hopes will dominate China's e-commerce sector
By RON GLUCKMAN

Phones ring madly, and Edward Zeng hops to the hook. It's spring, mating
season in China's dotcom mania, and you can feel the heat of mega-deals
brewing. Microsoft, Intel and most of the world's other high-tech giants
are in the capital for a series of IT summits in April. Zeng is high on
everyone's agenda. The CEO of Sparkice is fired up and full of enthusiasm.
He's red-hot. In play. In a working outfit of blue Oxford shirt and green
trousers, Zeng chills out between a constant stream of calls, sinking into
a padded black chair in his new headquarters at the stylish China World
Tower II. The vast offices are almost completely empty. "We've just moved
in," Zeng explains. "I don't even have a computer yet."

Not that he needs one. Should Zeng desire to check his e-mail, he need only
slip downstairs to his Sparkice Internet Café. It's one of a dozen in China's
largest chain. These form the backbone of Zeng's unconventional plan to
take the mainland online. Others talk of zipping along the information highway.
Zeng plans a thousand pit-stops, Internet centers designed to serve the
people of the People's Republic -- peasants, farmers and students alike.
"It's like building a ramp to the highway," says Zeng. "We want to bring
everyone online."

That might seem a backward approach to forging an Internet empire in a brave
new world consumed by faster chip speeds and broadband access. Yet even
as China's Internet use doubles every six months or so, Zeng notes, there
aren't yet 10 million users. "I'm not interested in a small percentage like
10 million people," he says. "I want to reach half." By that, he means half
China's entire population. "Over half a billion people!" he says, beaming.

If the numbers seem overly ambitious, factor in this: 37-year-old Zeng,
who is married with two children, not only oversees an entire floor of the
most prominent office building in Beijing, he runs a company that claims
a valuation of $150 million. Yet, just a few years back, Zeng was hawking
homemade T-shirts door to door in Toronto, just another Tiananmen-era refugee
looking to make a living overseas. Zeng isn't your everyday economic migrant,
however. The son of a doctor and an architect, he earned an MBA in economics
from prestigious Qinghua University and was a rising star within the State
Planning Commission. But a few days after the tanks rolled into Beijing,
Zeng abruptly resigned while on a trip to Japan. He took up a fellowship
at the University of Toronto, but it was a tough time, as he likes to recount
in a hard-luck story that plays well in the media.

Zeng, who spent six years in Toronto, recalls the hit-and-miss nature of
his T-shirt business. One time, he made a bundle printing Blue Jays shirts,
gambling correctly that the team would win North America's baseball title.
Other efforts weren't as fortuitous. "I sometimes brought home shirts I
couldn't sell. They filled the apartment. My wife and I had to sleep on
them," he says sadly. The Internet business, he adds, can be much the same.
"You start with a blank page, just like those white shirts, completely blank,
and you put your design on it. If it's a good idea, you'll make lots of
money. If not, you can be wiped out."

Thus far, Zeng has steered Sparkice on the path of success ever since returning
to China in 1995. The following year, Sparkice sealed its first and most
important deal -- a joint venture with China's Unicom, the nation's second-largest
telecom company. The name, he used to say, combined spark and ice, for China's
red-hot telecom market and Canada's chilly weather. But the story changes
as often as Zeng's business plan. Thus far, he has pioneered such things
as online payment systems and Internet cafés for China, started a service
provider, a data system and, as of April this year, a comprehensive B2B
platform that he says should nab a third of China's estimated $150 million
online transactions this year.

All the announcements create a hype about Sparkice, but many are waiting
to see results. "The question of course, is what is Sparkice's focus," says
Ted Dean, partner at Beijing consultancy BDA. "At this point, Sparkice really
needs to focus on its core business." But what is that?

Sparkice was originally established in Canada in 1993. Zeng then specialized
in finding funding for Chinese-based companies in reverse takeovers on North
American stock exchanges. Now, he says, "Sparkice is spark, for igniting
with new ideas, and ICE for information, commerce and education." Others
say Sparkice has merely bounced around, following perceived new opportunities,
issuing glorious press releases about pie-in-the-sky schemes, then abandoning
them like failed T-shirts if they don't develop. "Zeng is a supreme egotist,"
says one. "He's all talk, no substance." Yet, unlike many mainland Netrepreneurs,
Zeng has a solid business background, including stints on the boards of
several Canadian companies. Nor is he a Johnny-dotcom-lately. He helped
create the Chinese-English Wanwei Network, and two direct-to-home satellite
firms that beamed Chinese-language TV to North America.

Perhaps his most valuable experience was helping tired old-world firms,
particularly in China, realize the value of their assets in the new world
of IPOs and IT. "I've already made a hundred million dollars three times,"
he boasts, referring to his own Sparkice and two previous posts as a consultant
to companies that listed and reached the magic hundred-million mark. Yet,
this economist found it quiet in the boardroom. The Internet was where the
action was, and Zeng jumped aboard, grabbing the world's attention by opening
China's first Internet café in 1996. He now has over a dozen, mainly in
Beijing. There are also a couple in Tianjin and Sparkice expands to Shanghai
in April. And expect a publicity coup in May, when Zeng will open Tibet's
first Net café.

Already, the idea of the world's highest Internet café has raised questions
about restriction of freedom of information in a land not known for its
Internet welcome mat. The online edition of this magazine, for instance,
is blocked in China, along with that of CNN and some other sites in the
Time-Warner group. Yet Zeng sidesteps political controversy almost as adeptly
as he moves in the media spotlight. It's old hat for him. He talks nonchalantly
about meeting Bill -- that's U.S. President Clinton -- and Hillary. Clinton
has met Zeng twice in China, ushering in a media flood. He's been featured
in so many magazines, one local reporter called him "The Poster Boy for
the Internet in China." Indeed, in a landmark 1998 article, "China Gets
Wired," Time put Zeng at the top of the list of "Five Comrades Who Matter."

Such honors matter little, insists Zeng, who prefers tests of performance.
"Doing is what matters," he says. Besides, the real issue isn't politics,
but globalization, adds Zeng, who, like another famous Bill -- Microsoft's
Gates -- is also a best-selling writer on theory in the computer age. Zeng's
latest book just came out, Globalization: E-Commerce Theory and Practice
in China. Filled with charts and diagrams, it details Zeng's plan to nurture
his network of Internet cafés into a behemoth of an e-commerce business.

Zeng took the same pie charts and graphs to Internet World China, the second
of a series of mega-IT conferences in Beijing, in April. Using slides projected
on the wall during a talk in Chinese, Zeng detailed the enormous business
sure to flow to China, once the mainland is wired. "Global business on the
Internet will rise to $1.3 trillion by 2003," he says. And that figure should
double again in 2004, according to GartnerGroup, which estimates that B2B
transactions will explode from this year's $237 billion to $2.8 trillion
by 2004. "What we want to do is control the supply side of that business,"
Zeng says.

By Zeng's reckoning, China already makes much of the world's toys, textiles
and consumer products. "But the Chinese don't have computers. They don't
speak English, which is the language of the Internet." Enter his café strategy.
He plans to expand to full-service centers offering everything from novice
needs like help with English and e-mail advice, to Web-page hosting, scanning
and virtual showroom design. "By the year 2003, I plan to have 100 Internet
cafés, all over China," he says. "Right now the Internet reaches only 1%
of the people in China. But e-commerce could involve everyone from the students
to the farmers. Everyone wants to make money. We will link them, and control
the business."

It makes sense, conceptually, at least, but nobody has taken supply-side
theory to such a stretch before. Nobody bothered. After all, technology
firms focus on supplying hardware, systems or data to the dominant players.
Others find a role creating and servicing the infrastructure that facilitates
the business flow. Many naturally wonder, where's the money connecting cabbage
growers with buyers? Others question the entire scope of Zeng's projections.
"He makes a lot of noise, and gets a lot of attention, especially in the
Western press, but his real skill is self-promotion," says one Beijing-based
critic. "He really hasn't done anything yet." While Zeng claims China's
largest Internet café network, it's only a tiny fraction of an estimated
1,000 Net cafés scattered around the country. "Besides," the analyst adds,
"how much money can you make selling coffee and renting computer time for
$4 an hour?"

Zeng counters that the cafés have always been profitable. "Two to three
years ago, they brought in 80% of my business. Now, they contribute only
20% of revenues, even though they have been doubling or tripling each year.
"The reason," he says, "is e-commerce. It's booming in China." Zeng says
the Net cafes are just storefronts to his full-featured Internet vision.
"They are like the fishing pole for the entire business," he says. "I bring
them in, let them try the Internet and hook them." Zeng nets bigger fish
with the other businesses, which now contribute the majority of Sparkice
revenues. These include his ChinaRep division, offering Web hosting and
design, and Dragon Pulse, which is probably the greatest revenue-spinner,
selling China business data.

Credit his background as an economist -- and connections in official circles.
Others, from Beijing officials to frustrated media magnates, have long been
perplexed about how to meld China's inherent sense of caution with the freewheeling
spirit of the Internet. This entrepreneur saw only opportunity in the apparent
paradox. Information, or content, after all, is what the Internet is all
about. China data are hard to find, and so are valuable, especially to foreign
firms mulling mainland ventures. Drawing on connections from his stint with
the State Planning Commission, Zeng gathers and provides that information.
For a price.

Dragon Pulse claims to have one million mainland firms catalogued in a subscriber
database. Subscribers pay about $50 per search, or an annual fee. As a result,
Sparkice is growing by leaps and bounds. Zeng says revenues soared from
$300,000 in 1998 to $1.6 million last year. He expects revenues to reach
$8.5 million this year, and nearly double again in 2001. The company has
tripled its staff from last year's 100 employees. "Two years ago, there
were only 30," Zeng says, "and four years ago, it was just me." It's all
part of being a full-service company, says Zeng, who pauses yet again to
answer another ringing phone. They have never stopped. Each time, he hops
from the chair to his desk, then returns to the conversation. "This might
be the one," he says with a smile. He chats for a few minutes, then says:
"False alarm."

A few days later, the deals started pouring in. Zeng announced a partnership
with leading German retailer Metro AG, and a series of pacts with the Bank
of China and mainland-based shipping conglomerate COSCO to form what he
calls, "the B2B Dream Team." Fanciful notions? Perhaps, but as one Beijing
observer notes: "Zeng has been around for a long time and he's still around.
If nothing else, you have to credit him that." Indeed, Zeng may someday
be out-muscled by other mainlanders as China's Internet king. His e-commerce
dreams could be worth billions or nothing more than a bundle of misprinted
T-shirts. But it's a safe bet that no matter which way mainland IT develops,
this economist turned T-shirt vendor turned Internet tycoon will keep adapting
to the opportunities to keep Sparkice in the fray.